“This is a very rational decision for Amazon to make in the micro; in the macro, it reinforces a really challenging trend for the U.S. economy,” said John Lettieri, the president of E.I.G. “The divide between prosperous and distressed regions is growing wider. And it’s because of things like this.”
In previous economic expansions, E.I.G. has found, the benefits were more broadly felt, and growth was driven by more places, including rural communities. Today, data points about the national economy no longer describe well what’s happening on the ground in many places.
Part of what has changed is that the American economy has become dominated more by companies like Amazon, which produce services instead of manufactured products, and thus employ software engineers instead of assembly line workers.
Drop a big Amazon headquarters into Washington or New York, and economists expect the 50,000 workers there to be more productive than if the same 50,000 jobs were dropped into Indianapolis. Simply putting them in New York, near so many other tech workers, increases the likelihood that Amazon invents more services, connects to more markets, makes more money.
Those added benefits are so strong, economists say, that it’s worth it to companies like Amazon to pay more — a lot more — for office space and employee salaries in New York City.
“If you are in the business of making new things — whether it’s a new product, or a new way of delivering things, or a new service — and it’s something that is unique, and it keeps changing and it needs updating, the most important factor of all is human capital,” said Enrico Moretti, an economist at the University of California, Berkeley. “It’s not like making soap, or like making textiles.”
Mr. Moretti’s latest research suggests that scientists who move from small to larger clusters of experts produce more inventions, a pattern that plays out regularly in Silicon Valley. Looked at another way, a majority of patents come out of the largest metro areas. If we spread their inventors evenly across the country, Mr. Moretti said, we’d probably have significantly less innovation in America.